Yu Lap Man v. Good First Investment Ltd.
Read the full judgment text of HCA 6801/1997 on BabelCite. This High Court CFI judgment was delivered on 24 February 1998.
1. The Plaintiff sued on an agreement dated 29th December 1992 ("the Agreement") made with the Defendant. By the Agreement the Plaintiff agreed to transfer to the Defendant the rights and liabilities of an agreement made between Hoi Tin Investment Company Limited (Hong Kong) and the Xiamen City Government in China in respect of a piece of land in Xiamen. The Defendant agreed to pay the Plaintiff a fee of RMB2,165,240. The Agreement further provided that the Defendant was to appoint the Plaintiff
Cited by 1 case · Cites 1 case
|
HCA006801/1997 1997, No.A6801 IN THE HIGH COUR OF HONG KONG COURT OF FIRST INSTANCE --------------------
-------------------- Coram : Hon Mr Justice Cheung in Chambers Date of Hearing : 19 February 1998 Date of Handing Down Judgment : 24 February 1998 -------------------- J U D G M E N T -------------------- Background 1. The Plaintiff sued on an agreement dated 29th December 1992 ("the Agreement") made with the Defendant. By the Agreement the Plaintiff agreed to transfer to the Defendant the rights and liabilities of an agreement made between Hoi Tin Investment Company Limited (Hong Kong) and the Xiamen City Government in China in respect of a piece of land in Xiamen. The Defendant agreed to pay the Plaintiff a fee of RMB2,165,240. The Agreement further provided that the Defendant was to appoint the Plaintiff and one Mr Hui Sui Wai as directors of the Defendant and allot 30% of its shares to them. 2. Pursuant to the Agreement, the Plaintiff arranged for the Defendant to enter into a formal transfer agreement with the Xiamen City Government. The Defendant paid the Plaintiff RMB2,165,240, but failed to allot 30% of the shares to the Plaintiff and Mr Hui or appoint them as directors. The Plaintiff is seeking specific performance of the Agreement relating to the appointment of directors and allocation of shares and also damages arising from the breach of the Agreement. 3. The Defendant denied that it had entered into the Agreement with the Plaintiff and alleged that the signature of the Defendant was a forgery. Instead the Defendant contended that it had entered into an earlier agreement dated 12th December 1992 ("the Earlier Agreement") with the Plaintiff regarding the transfer of the agreement with the Xiamen City Government only. 4. The Defendant applied before the Master to stay the action on the basis that the Agreement and the Earlier Agreement contained an exclusive jurisdiction clause in which the courts in the People's Republic of China ("PRC") had exclusive jurisdiction to deal with disputes arising from the agreements. The Master stayed the proceedings. The Plaintiff now appeals against that decision. Grounds of appeal 5. The Plaintiff did not challenge the exclusive nature of the clause before the Master. Instead, it was argued before him that since the Defendant had denied the existence of the Agreement, therefore it had no right to rely on the exclusive jurisdiction clause. This point is not taken in the appeal. Mr Martin Lee S.C., who did not appear in the court below, now challenges the exclusive nature of the clause. The two issues that were raised before me are : first, whether the clause conferred exclusive jurisdiction on the courts in PRC and second, whether the matter should, in any event, be stayed on the ground of forum non conveniens. Exclusive jurisdiction clause 6. The Agreement and the Earlier Agreement are in Chinese. Clause 5 of both agreements are identical.
Two translations were obtained by the parties on Clause 5. The translation first obtained by the Defendant is as follows :
The Plaintiff's translation is as follows :
As both versions of the English translation were certified by the same court translator, I asked him to attend court to clarify the difference in the translation. Counsel took the opportunity to question the translator on the translations. Although the translator initially agreed with Mr Wu, Counsel for the Defendant, that the words "有關糾紛受中華人民共和國法院管核" are equally capable of being translated as "all disputes shall be subject to the jurisdiction of the PRC courts" and also as "all disputes are subject to the jurisdiction of the PRC courts", he eventually agreed that the translation should simply be that "all disputes are subject to the jurisdiction of the PRC courts". He stated that the words "shall be" are assertive and connote an obligation whereas the Chinese character "受" does not carry such a meaning. As a bilingual judge, I adopt the translation obtained by the Plaintiff for the reasons now accepted by the translator. Principles in the stay of proceedings 7. The court has a discretion whether to grant a stay of proceedings brought in breach of an agreement to refer disputes to a foreign court, but the discretion should be exercised by granting a stay, unless strong cause for not doing so is shown : Pioneer Container [1994] 2 AC 324 approving the principle in Aratra Potato Company Limited v. Egyptian Navigation Company [1981] 2 Ll L.R. 119. 8. The principles to be applied in the interpretation of Clause 5 can be summarised as follows :
Proper law 9. Before I embark on the interpretation of the clause, there is a matter which has to be dealt with. In Dicey and Morris on the Conflict of Laws, page 421, the learned authors stated that
The parties did not address me on the governing law or the proper law of the Agreement. Although Clause 5 of the Agreement provided that the relevant law applicable in disputes arising from the Agreement was the law of PRC, the parties proceeded on the basis that the interpretation should be according to common law principles. Although the Defendant relied on a letter from its lawyers in China on the jurisdiction clause, there is no evidence of Chinese law on the interpretation of Clause 5. The Chinese lawyers simply referred to "basic principles common in the international community concerning jurisdiction and governing law". In the absence of such evidence, I will proceed on the basis that the Hong Kong law and the law in PRC in this regard are the same : para. 794 Halsbury's Laws of England Volume 8. Defendant's view 10. Mr Wu submitted that Clause 5 was an exclusive jurisdiction clause because the subject matter of the agreement was in relation to a transfer of land in Xiamen; the consideration of the purchase of the land right was in PRC currency and the agreement was executed in Xiamen. The agreement provided that it was subject to the protection of PRC law and all disputes arising from the agreement were subject to the jurisdiction of the courts in the PRC and the governing law of the agreement was the PRC law. There was no reference to any other law or court in the agreement. Clause 5 provided submission to the PRC jurisdiction simpliciter. Other cases 11. In Continental Bank N.A. v. Aeakos Compania Naviera S.A. and others [1994] 1 WLR 588 an American bank granted loan facilities to Greek defendants under an agreement which provided that each defendant "irrevocably submits to the jurisdiction of the English courts ... but the bank reserves the right to proceed under this agreement in the court of any other country claiming or having jurisdiction in respect thereof." Steyn LJ held that :
12. In Sohio v. Gatoil the parties were American companies carrying on business in America. Their contract provided that it should be governed by English law and "under the jurisdiction of the English Court without recourse to arbitration". Staughton LJ held that :
13. In Berisford plc v. New Hampshire Insurance Company [1990] 2 QB 631 the policies of insurance were governed by English law with the term that "This insurance is subject to English jurisdiction." It was held that the clause was not an exclusive jurisdiction clause. The clause was merely declaratory. Hobhouse J. stated that :
14. In the Hong Kong case of T and K Electronics Limited v. Tai Ping Insurance Co. Ltd. [1993] 3 HKC 330 the policy of insurance contained the clause that "This insurance is subject to English jurisdiction". Stone J. held that the clause was not exclusive but rather permissive in nature in the light of the connecting factors with Hong Kong. Clause 5 not exclusive 15. In the present case the word "exclusive" of course does not appear in the clause. This, however, is not necessary. I have to construe the clause to see whether an obligation is imposed on the parties to invoke the jurisdiction of the courts in PRC exclusively. The word "受" was used in Clause 5 which means "subject to". The fact that the words "subject to" are used does not mean that the clause must be exclusive in nature. Neither would the words "Both parties agree" at the beginning of the clause render the clause exclusive as every contractual term represents the agreement of the parties anyway. The fact that the clause refers to the law of PRC twice would not, so to speak, boost up the exclusive nature of the jurisdiction clause. In my view, the reference to the laws of PRC in the first place is descriptive, namely the parties agree that the agreement is subject to the protection of the law of PRC, then it specified that the disputes are subject to the jurisdiction of the courts of PRC and the law of PRC shall apply to it. Further, the fact that PRC law was chosen does not mean that the jurisdiction clause must be exclusive in nature as can be seen from Berisford. 16. While no doubt regarding the Agreement there are connecting factors with China, there are also other factors pointing towards the connections with Hong Kong. The Defendant is a company incorporated in Hong Kong with its registered office in Hong Kong. Although Mr Wu submitted that of the four directors and shareholders of the Defendant, only one is working and living in Hong Kong, the company search revealed that the directors and shareholders, who were the same, all gave a Hong Kong address and all had Hong Kong identity cards. The Plaintiff is said to be an American national. He has not denied this but he asserts that he has been living in Hong Kong for the past ten years. 17. Under the Agreement, the subject matter is not simply the land in Xiamen, but also the appointment of the Plaintiff as one of its directors and the allocation of shares in a company which is registered in Hong Kong. If the subject matter is simply land in Xiamen, one may conclude, as conceded by Mr Lee, that the courts in PRC should have exclusive jurisdiction. However, this is not the case. In matters concerning the transfer and allottment of shares and appointment of directors of a Hong Kong company in which formalities must be observed under the Hong Kong Companies Ordinance, I just cannot see how it can be said the clause creates an obligation to litigate in PRC exclusively. The question of shares and directorship is now the only issue between the parties. In my view the clause is not exclusive in nature, and to adopt the words used in previous cases, the clause is inapt to create any obligation of litigating exclusively in the courts in PRC. Clear words could easily have been adopted if such an obligation is intended. The clause is either declaratory or permissive : it is a contractual acknowledgement by two foreign parties of the jurisdiction of the courts in PRC and a contractual agreement to the invocation of that jurisdiction. Ultimately the question is one of construction. How other courts construe jurisdictional clauses are decisions based on the particular facts and are not binding on other cases. 18. There is some vague reference in the Defendant's affidavit on the question of intention of the Defendants and on matters relating to negotiation. They are inadmissible and should not be considered in the construction of the clause. Forum non conveniens 19. Although the question of forum non conveniens was not dealt with before the Master, this point was argued by both parties in this appeal. Mr Wu submitted that the court should stay the action on this ground as well. The principle is governed by Spiliada Maritime Corporation v. Cansulex Ltd. [1987] 1 AC 460 at p.476 in which Lord Goff stated that :
20. The point can be dealt with shortly. Regarding the connecting factors with China and the availability of witnesses in China, Mr Wu has merely shown that the courts in PRC are equally appropriate as the Hong Kong courts to deal with this case. There certainly is no evidence that the witnesses could not come to Hong Kong. The burden on the Defendant is not to show mere practical convenience, but whether there is another available forum which is clearly or distinctly more appropriate than the one chosen by the Plaintiff. As Litton V-P (as he then was) in The Kapitan Shvetsov [1997] 1 HKC 485 stated that :
In this case the Defendant is a Hong Kong company, even for the sake of argument, the Plaintiff is a foreign plaintiff, jurisdiction is nonetheless properly founded in Hong Kong. Such a right should not be lightly disturbed as emphasised by The Kapitan Shvetsov. 21. The parties also argued on the expiration of the limitation period to bring proceedings in China. There is no evidence that the Plaintiff deliberately withheld from commencing proceedings in China on the Agreement. In Spiliada, Lord Goff discussed the issue of a plaintiff commencing proceedings in England which has not been time-barred, but there is some other jurisdiction which is clearly more appropriate for the trial of the action but where the Plaintiff has not commenced proceedings and where his claim is time-barred. He was of the view that if the plaintiff deliberately refrained from commencing proceedings in such a country, the court should not hesitate to stay the proceedings in England. This is not the case here. I am not satisfied that the Defendant has discharged the burden of showing that the courts in PRC are the more appropriate forum for the determination of this action. Conclusion 22. Accordingly the appeal is allowed and the summons to stay the proceedings is dismissed. Costs 23. As the challenge to the exclusive jurisdiction clause was raised for the first time in this appeal by the Plaintiff, Mr Lee conceded that the cost order before the Master should not be disturbed. Accordingly, I shall not interfere with the cost order made by the Master. However, as the Plaintiff succeeds in removing the stay of the proceedings, the costs of the appeal must be awarded to the Plaintiff. (P. Cheung) Judge of the Court of First Instance Representation: Mr Martin Lee, S.C. leading Mr Paul Lam, inst'd by M/s Ho, Tse, Wai & Partners, for the Plaintiff Mr Paul Wu, inst'd by M/s Phyllis K.Y. Kwong & Leung, for the Defendant |
Cases cited in this judgment
Other judgments that cite this case